$18.9 billion.  That’s what the 2011 debt-limit standoff and the threatened U.S. credit default will be costing taxpayers in higher interest payments over the next decade, according to the Bipartisan Policy Center.

And who was responsible for those billions?  That would be the Republicans in the House and Senate who some of us loyally vote for election after election, no matter how destructive their governance.

Way to go, voters.  Were you MIA when the memo came out outlining which party shows up wearing the pretend mantle of fiscal responsibility and which one actually suits up, rolls up its sleeves, and goes to work fashioning rational solutions to real problems—not the manufactured ones?

Way to go, Republican imposters! You sure did fool some of us. That first salvo at economic chaos two years ago sure did a lot to lower our taxes!  And wow, did that ever cut the feds’ spending! Thanks to you, I’m feeling really optimistic right now about paying off my part of that wasted $18.9 billion!

Guess what? 2011 was just act one of an invented fiscal crisis fashioned lovingly by the Grand Old Party. If you thought act one was disturbing, get ready for act two coming to D.C. some time before cherry-blossom time.

That’s when those same warm and fuzzy Republicans will be putting shoulder to the battering ram again, trying one more time to push us (and the world) to the brink.

Think their shenanigans have nothing to do with you? Well, think again. Here’s a short (and, admittedly, simplified) sampling from various online sources of where the pain could land this time around if Republicans succeed.

• Further downgrading of U.S. credit rating (Hey, we already lost the triple-A, it won’t feel so shocking this time around, will it?)
• Putting at risk continuing safe-haven investments by individuals and countries in U.S. treasuries
• Defaults on the federal government’s legal obligations
• Stocks and bonds (Watch ‘em fall.)
• Delayed Social Security and Medicare payments to fixed-income grandmas and grandpas
• Delayed payments of salaries to people in the military, and benefits to their families
• Delayed tax refunds and federal payments to investors
• Gutting of programs, such as food stamps,  to those in need
• Higher interest rates on U.S. treasuries, home mortgages, car and college loans, credit cards, and federal grants to cities, counties, and states (Hey, who amongst us isn’t craving higher state and property taxes?)
• Plunging 401ks  (Early retirement? Forget about it.)

Perhaps you don’t trust my Internet wise guys’ take on the fallout from the economic catastrophe Republicans are shoving us into. Then what about the words of Saint Ronald—holy patron saint of Republican economics?  Would you trust his instead?

Here he is, Reagan himself, in a radio address of September 1987, decrying the catastrophic effects of playing chicken with the debt ceiling.

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Dan Froomkin’s explanation of the debt ceiling debacle is one of the best I have read. He makes the simple, obvious, point: The obsessive focus on the deficit helps Congress and the White House avoid a discussion on raising taxes—because wealthy donors of both parties do not want that discussion. You can read his excellent and illuminating article in the Huffington Post here.

There’s strong agreement among progressive economists that this deal is going to harm an already weakened economy, and could push us into a double dip recession.  But even worse, it created a super committee of twelve members of Congress who will focus on cutting Social Security and Medicare in their quest to reduce the deficit. In the following excerpt, Froomkin identifies who benefited from this deal, and why. He asks the most important question: Cui bono? Hint: It’s not us.

It’s not hard to see whose financial interests are served by a consistent pressure to reduce the deficit and shrink government’s reach: the wealthy, and especially Wall Street — or, as Rob Johnson, a senior fellow at the liberal Roosevelt Institute put it, “people who don’t want to pay taxes in the future.”

For wealthy people who own a lot of bonds and other long-term financial assets, deficit spending means a threat of higher interest rates and inflation.

From the Wall Street perspective, “inflation is a huge risk,” said Troy Davig, U.S. economist at Barclays Capital, the British investment bank. That’s because inflation erodes the value of bonds. “It’s implicitly defaulting on the debt,” he said.

Banks and major corporations have another incentive to oppose government borrowing: They would rather be the lenders themselves, so they can charge interest and assess fees.

Another assumption among progressives is that the financial sector has its eye on the money flowing through the big entitlement programs.

“If you can use deficit hysteria to privatize Social Security and Medicare, there is a lot of money to be made,” said Robert Kuttner, the co-editor of the American Prospect. Having Wall Street manage retirement accounts could “generate a ton of fee income and prop up the stock market.”

Palley said even a reduction in benefits or coverage could be lucrative for Wall Street. “The less effective Social Security is as a savings vehicle, the hope is the more private savings will be directed toward finance,” he said.

 Photo credit: SEIU International 

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$2 trillion is a very popular number. When the right-wing hostage takers at long last agreed to a $2.1 trillion ransom for the debt ceiling, they left the impression that $2.1 trillion was a carefully calculated and negotiated number. Maybe it was. I rather doubt it, because a search on the phrase “$2.1 trillion” yields an array of citations that might lead one to believe that $2 trillion is less a mathematical calculation than a convenient ballpark number, easily thrown about when an economist or policy maker wants to make a big point with a big number.

Here are a few examples:

The Obama administration says that, in downgrading the U.S. credit rating to AA+,  Standard & Poor’s  made a significant mathematical mistake in a document it provided to the Treasury Department, overstating the federal debt by about $2 trillion over 10 years. “A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokeswoman said.

The Urban Land Institute says the United States, needs to invest $2 trillion to rebuild roads, bridges, water lines, sewage systems and dams that are reaching the end of their planned life cycles.

In 2009, stock owners, bankers, brokers, hedge-fund wizards, highly paid corporate executives, corporations, and mid-ranking managers pocketed—as either income, benefits, or perks such as corporate jets—an estimated $1.91 trillion that 40 years ago would have collectively gone to non-supervisory and production workers in the form of higher wages and benefits.

The global hedge fund industry now controls total assets worth $2.02 trillion, according to Hedge Fund Research. That’s up $102 billion from the first quarter of 2010 and is more than the industry had in the second quarter of 2008, when assets peaked at $1.93 trillion.

U.S. state and local governments spend close to $2 trillion annually on goods and services, according to an ABC News report.

Multicultural Americans buy over $2 trillion in goods and services annually, says Ethnoconnect.

The United States currently spends more than $2 trillion a year on health care, according to a White House statement.

According to the World Trade Organization, the total annual global trade in goods and services before the current economic crisis was approaching $40 trillion; but as much as $2 trillion of the total may be illicit money that has been illegally moved out of a country, or has been used to provide illegal kickbacks to corrupt executives or officials.

Counting the value of lives lost as well as property damage and lost production of goods and services, losses attributable to the terror attacks of September 11, 2011 already exceed $100 billion. Including the loss in stock market wealth — the market’s own estimate arising from expectations of lower corporate profits and higher discount rates for economic volatility — the price tag approaches $2 trillion.

Big American companies are sitting on almost $2 trillion of cash because there aren’t enough customers to buy additional goods and services, writes economist Robert Reich.

India’s Finance Minister recently said that successful implementation of his nation’s goods and service tax (GST) can give a trillion-dollar boost to the economy, taking the total output to $2 trillion in a short span of time.

Consumers aged 50 and older make up 27% of the total population and own between 70 and 79% of all financial assets. This group accounts for more than 40% of total consumer demand and control 50% of all discretionary spending. They buy $2 trillion worth of goods and services each year and spend 2.5 times as much as younger consumers on a per capita basis.

All in all, that’s a lot of $2 trillion chunks o’change.  Are all of those numbers based on anything—anything at all? They might be, but the proliferation of that particular figure makes me wonder a bit. And, taken in sum, they offer a 21^st  Century update of a quip made famous by U.S. Senator Everett Dirksen [D-IL], who served in Congress from 1951-1969:  “A [tr]illion here, a [tr]illion there, pretty soon, you’re talking real money.”

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The standard progressive narrative is that president Obama wanted a clean debt-ceiling hike but was forced, by extremists in the Republican Party, into making unwanted budget cuts—a deal Democratic Rep. Emanuel Cleaver of Missouri called “Satan’s sandwich.”

But, in a recent article titled “The Myth of Obama’s Blunders and Weakness,” Glenn Greenwald says:

The evidence—beginning with Obama’s own repeated statements—is that that’s just not true: he affirmatively wanted these cuts and more, as part of the debt ceiling hike.

Greenwald points to, among other things, Obama’s hand-picked, anti-entitlement deficit commission, and its dubious recommendations—recommendations that will be considered by the newly minted congressional panel of twelve who will decide our fates behind closed doors.

Another progressive narrative is that it was the Republicans who were calling for cuts in Social Security and Medicare. But, not so, according to Rep. John Conyers as reported in OpEd News:

“The Republicans, Speaker Boehner or Majority Leader Cantor did not call for Social Security cuts in the budget deal. The President of the United States called for that,” declared US Representative John Conyers in a press conference held by members of the House “Out of Poverty’ Caucus on 07/27/11.”

Robert Reich’s take on the debt deal:

By [The White House and Democrats] putting Medicare and Social Security on the block, they have made it more difficult . . . in the upcoming 2012 election cycle, to blame Republicans for doing so.

By embracing deficit reduction as their apparent goal—claiming only that they’d seek to do it differently than the GOP—Democrats and the White House now seemingly agree with the GOP that the budget deficit is the biggest obstacle to the nation’s future prosperity.

The budget deficit is not the biggest obstacle to our prosperity. Lack of jobs and growth is.

Matt Taibbi on the recent debt ceiling debates:

The Democrats aren’t failing to stand up to Republicans and failing to enact sensible reforms that benefit the middle class because they genuinely believe there’s political hay to be made moving to the right. They’re doing it because they do not represent any actual voters. I know I’ve said this before, but they are not a progressive political party, not even secretly, deep inside. They just play one on television. . . .

It’s a no-brainer that the debt deal will worsen an already bad economic situation for working families.  Senator Bernie Sanders, summed it up in three words: “immoral, grotesque, unfair.”

So, what could Obama have done differently?

David Dayen, writing in the American Prospect, cites five strategies President Obama and Democrats in Congress could have embraced to avoid the debt-ceiling debacle. The following are paraphrased and abbreviated versions of his five suggestions along with my comments. To read his entire, excellent article, click here.

1. Fixed the economy

The stimulus package helped to some extent but everyone now agrees it was too small. If president Obama had strongly pushed for, and a Democratic Congress had approved, a second stimulus plan in late 2009—when the Senate had 60 Democratic votes—the recovery would have been more robust, leaving Republicans without much leverage in the debt-ceiling negotiations.

A second stimulus may not have passed, but the point is Obama didn’t try.

2. Included the debt limit in the 2010 tax deal.

At the end of 2010, during the lame duck session, the Bush tax cuts were due to expire, and Republicans were desperate to see them extended—tax cuts being their signature issue. At that time, the president could have included the debt ceiling in that deal, but, although many experts recommended he do so, he chose not to. In a press conference during that time, when a reporter asked why he was not including the debt ceiling in the deal, the president said it wasn’t necessary, that he couldn’t imagine anyone in Congress threatening government default.

My feeling is that Obama needed the fight we just had to enact the cuts that he, his donors, and his political advisors wanted.

3. Argued against the premise that America has a debt crisis

The Republican narrative is that America has a massive debt crisis that requires slashing spending so as to provide confidence for the business community to invest and create jobs.

The GOP premise, of course, is false; but Democrats and the President never took that argument to the public. The truth is that a contraction in government spending in a weakened economy is a recipe for economic disaster—a view held by progressives Paul Krugmann, Robert Reich, Joseph Stiglitz, and others.

Instead, the president and conservative Democrats embraced the GOP’s false premise, and competed with them to offer even more fiscal austerity, which pushed the debate to the right. Not satisfied with Senator McConnell’s offer of a clean debt ceiling vote, Obama sought a $4 trillion “grand bargain” with Republicans to cut spending and “entitlements,” but with a corresponding tiny increase in revenue.

My feeling is that the president went after a “grand bargain” including “entitlement” cuts because his political advisors, i.e. Plouffe and Alexrod feel it will boost corporate donations and help him get reelected.

4. Made credible threats

Many legal scholars believe that the president could have threatened to use the 14^th amendment, which gives the president a way to ignore the debt ceiling. But the president sought legal advice that advised him against using it.

Another threat the president could have used: The Treasury has the authority to mint platinum coins of any denomination without the input of Congress. Treasury could have legally minted two $1 trillion coins, deposited them in the Federal Reserve, which would then have been used to pay bills. This is way out there—the stuff of novels—but certainly indicates the president had super powers at his disposal.

A more realistic option, Obama could have made a good argument that the debt ceiling itself is unconstitutional.

Dayen’s point is that if Obama had made credible threats, the public would have gotten behind his strong leadership.

5. Involved the public earlier than July 25

On July 25, president Obama asked the public to call their congressmen, and they obliged enthusiastically, causing a temporary shutdown of congressional switchboards and email servers. Because the president still commands tremendous loyalty, he had an opportunity to involve the public much earlier in the debate, to organize for a better deal, to use them as a grassroots ally in the legislative process.

But for me the issue is larger than what Dayen describes. From the moment he took office, the public has been waiting for true progressive leadership from president Obama, and would have followed him over a cliff for policies that healed the economy, supported working families, and reigned in the predators on Wall Street.  If he had reached out to the public, and provided that leadership, the “shellacking” of 2010 would not have happened and the Tea Party would never have taken hold.

Photo credit: www.whitehouse.gov

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Ignoring warnings of danger ahead. Steaming at full speed toward disaster. That was the tragedy of the Titanic and its rendezvous with a mass of solid ice on the night of April 14, 1912.  With only about two weeks until the August 2^nd deadline for raising the debt ceiling, the fate of our ship of state has much in common with that ill-fated ship.

After all, the Titanic was considered state-of-the-art for its time—too big to fail. And because of that belief, there were only twenty lifeboats onboard, only enough for about fifty percent of the more than two thousand passengers.  Earlier on that infamous evening, other ships had reported icebergs in the area and recommended proceeding with caution.  But belief in the ship’s unsinkability gave the captain the confidence to order the ship to plow full-speed ahead.

Like the captain of the Titanic, Republicans are ignoring advice to proceed with caution. Just take a hard look at their irresponsible, risky, and irrational approach to the debt-ceiling negotiations. We’ll never know if these stalwart guardians of all things advantageous for the economy’s highest earners believe their own fantasy rhetoric about the economy’s ability to weather a default. But surely since last May, when debt-ceiling discussions began in earnest, the Republicans have been blithely ignoring the danger signs out there in the chilly waters that are the fragile American economic recovery.

As economist Robert Kuttner, founder and editor of The American Prospect, explains: “It is one thing for right-wing Republicans to deny Darwin, or sexual orientation, or even climate change, where the consequences can be fuzzed up via junk science and the impact of science-denial is diffused or delayed. It is quite another to deny the reality of an event scheduled to happen in a couple of weeks.”

Dismissing calls from a slew of what Republicans might call “financial know-nothings,” such as Secretary of the Treasury; head of the Federal Reserve; 450 business leaders, the conservative U.S. Chamber of Commerce, and the Business Roundtable who sent a letter urging that “it is critical that the U.S. government not default in any way on its fiscal responsibilities,” Republicans appear not to care who drowns in the economic maelstrom that clearer heads and steadier hands have been predicting if the U.S. defaults on its obligations.

And make no mistake about it. Failing to raise the debt ceiling will not just affect the bottom line for the fat cats of Wall Street.  According to a majority of mainstream economists, a Republican-induced default could unleash a torrent of dire economic blowback for the highest to the lowest earners.

And what would the federal government and the economy look like after the first default in this country’s history?  According to the nonpartisan National Journal:

1. The government would be forced immediately to reduce its spending by $125 billion every 30 days, reflecting the amount the federal government needs to borrow each month to finance its existing commitments.
2. Treasury bonds, currently considered the safest, most secure investment in the world, would collapse, causing interest rates to “soar to record highs.”
3. 650,000 jobs could be lost in the U.S. due to bond-rate increases.
4. Medicare and Social Security would be subject to deep cuts.
5. The nation’s creditworthiness would be damaged in global markets.
6. The stock market would plunge, and a double-dip recession could be triggered.
7. The federal government would be forced to consider furloughs or mass layoffs of federal workers, affecting the delivery of essential services.
8. Interest rates on mortgages for homeowners and small businesses would skyrocket.

No matter how many calls by economists, responsible politicians, and business moguls for sanity on the debt-ceiling issue, the negotiations-that-shouldn’t-be-negotiations seem each day to be going nowhere. As the August 2^nd deadline approaches, the hope is that rational and responsible players in Congress and the White House will prevail and steer the ship  onto a safer course.  If not, get ready.  It might be time to haul out the lifejackets.

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